If you are an artist and still don’t use [NFTs] (Non-Fungible Token), you are potentially missing [out on] millions of dollarsOlawale Daniel
Just a few weeks ago I purchased my first three NFTs. They’re three friendly looking dragon collectibles known as Dizzy Dragons and they each have unique traits of varying scarcity which make them more or less valuable. These dragons are part of a collection of 7500 unique NFTs and there will only ever be one of each. The three dragons cost me about 200 dollars after gas (transfer) fees and it might sound like a lot of money for glorified JPGs but who knows – this is the new digital economy era and NFTs are still part of the “wild, wild west”. But, if you’ve never heard much about NFTs before then I suspect you might have questions…
So allow me to explain what an NFT really is – for those of you who know next to nothing about them. An artist named Beeple made history earlier this year by selling an artistic collage as an NFT on auction this year when it sold for $69,000,000 and shocked the world. Few really understand what NFTs are, but they are likely to take over the world in due time; technically, NFT is short for Non-Fungible Token and in the cryptocurrency world that means that this specific token minted on the blockchain is completely unique or extremely limited in quantity. The NFTs are linked to some sort of content, such as music, art or property details for assets in the real world and they are able to be verified on the blockchain for authenticity purposes using an encrypted hash code which acts like a fingerprint. The blockchain will also store a history of every person or wallet that has ever held each token and every transaction will be saved on the blockchain forever. So, in the end, they are impossible to forge and pass off for the original; you could copy and paste the JPG, but it would be like taking a photograph of the Mona Lisa rather than owning the painting.
Since digital art is super hot right now, a huge variety of tokenized collectibles, art, music and photographs can be found on NFT marketplaces such as Opensea.io where they can be purchased outright or bid on. To put the size of the NFT market into context for you, the Opensea.io marketplace has had roughly one billion dollars of transactions on its platform within just the past 30 days, and by over 90,000 different users in the marketplace. The userbase growth and transactional volume on Opensea.io are doubling at an exponential rate as the NFT market gains more and more public awareness.
So, why did I decide to buy my three NFTs?
Well, partially it was because I wanted to be an early investor in the movement that will change the world. Do I expect it to make me rich? No, not really. And I do actually like the artwork of these characters – I’ve even made one my profile photo on Twitter. On the technology side, this project is also interesting because it is allowing for a fusion process at the end of the month where holders can merge two different Dizzy Dragons NFTs into one, keeping the most valuable traits and destroying one NFT in the process. Therefore the amount of Dizzy Dragons in existence could be halved theoretically, and I’ve also identified the team as being legitimate in the space with experience under their belts in projects of this nature. So, there’s a chance I might take some profit on one or two and keep the other after a few months, but it’s too early to tell at this point. This is a very niche and risky asset class at the moment, so one should never play with more money than they are willing to lose if it all goes wrong. You better at least enjoy the artwork.
What are the benefits of owning a digital collectible?
I suppose it would help to wonder why anyone would want to own a tangible collectible such as a Pokemon baseball card? Usually, the content of the collectible resonates with the holder and the scarcity aspect of the collectible is what makes some collectibles more valuable than others. Digital assets that you purchase are held in a cryptocurrency wallet, such as the Coinbase Wallet, where your private keys are encrypted and stored on your personal device and a backup seed will be generated with 12-24 unique words so that if you ever lose access to your device you can regain access to your lost wallet. Hence, one benefit of owning a digital collectible over a physical collectible is that the digital collectible will never lose value due to physical damage and it is incredibly difficult to steal. NFTs are easily transportable and there is a highly liquid online marketplace available for them that require no shipping or handling, and it caters to a global market.
On top of this, some NFTs will come with additional perks, like access to other content or real world events. One relatively new NFT project called Stoner Cats stars big names like Mila Kunis, Ashton Kutcher, Vitalik Buterin (Ethereum co-founder), Chris Rock and Seth Macfarlane. Buying a Stoner Cat NFT will give you access to the animation series created by them, and without a token in your wallet the episodes are unable to be viewed. The Stoner Cat NFTs were originally minted at a price of 0.35 Ethereum (or around 1000 USD) one month ago, but they are now being sold on the secondary market for about 0.5 ETH at minimum (around 1550 USD). So those who bought an NFT when they launched and binged the episodes can now sell their collectible at a profit to whoever wants to watch it next. There are only 10,400 Stoner Cats in existence, so they will need to find new homes regularly and as long as demand is greater than supply, the prices will continue to increase.
And what are the benefits for artists compared to traditional means or selling work?
Well, one of the coolest aspects of NFTs for an artist is that they are built on top of blockchain technology which is immutable–meaning it cannot be altered without agreement from majority of the community–and secondly, there is also a smart contract layer on the Ethereum blockchain which allows for certain code to be attached to any NFT so that any sale automatically triggers a specific contract. For instance, most NFTs are minted with a smart contract attached that gives the original artist a small percentage of every resale (2.5-5%) when their art is flipped from buyer to buyer. This means that the artist’s work is much more lucrative – even in the secondary market. This is probably the number one reason why many artists are flocking to the NFT marketplaces to try to earn a living, because startup fees are very minimal and the returns could be gigantic in comparison to conventional means.
In conclusion, NFTs are a new way of doing business and they will likely take over the digitization of property rights – whether it’s for real world assets like vehicles and properties, but for now they are making waves as a form of entertainment and digital collectible. I hope you’ve learned something from this article and might be just a little bit more wise then the average person now.
Drop a comment below or ask a question – did I explain the concept well enough?
What are your thoughts on NFTs? Any plans to create or buy one any time soon?